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No Such Thing As a Tax-Free Lunch At Google?
theodp writes "In search of the best corporate cafeteria in the world, Gourmet Live's Tanya Steel visited the Googleplex, where she found Petaluma chicken cacciatore, porcini-encrusted grass-fed beef, whole-wheat spaghetti pomodoro, and Parmesan-creamed onions on the menu in one of the search giant's 25 cafes. So, must all good things come to an end? The WSJ's Mark Maremont reports that it's debatable whether Silicon Valley's daily fringe-benefit meals are taxable, and the issue is now on the IRS's radar. 'What would a food tax on Google's meals look like for the average employee?' Maremont asks. 'Assuming a fair-market value of between $8 and $10 per meal, a Googler chowing down two squares a day could get dinged for taxes on an extra $4,000 to $5,000 a year.' That'd be just fine with UF tax-law Prof. Martin J. McMahon. 'I buy my lunch with after-tax dollars,' said McMahon. 'And I have to pay taxes to support free meals for those Google employees.'"
In Canada, this is already going on.
We (as a country, and yes, I'll speak for my country here) tend to tax things that employees receive as part of doing their job. Like, income. Company car usage on personal business. Certain types of business accommodation perks.
Unless google is willing to open their cafeteria to the world, getting "free" meals as part of your job is, well, part of your job. I think most people can agree that the US tax system has a few loopholes - but why is it crazy to expect people to pay taxes on their income?
- Nec Impar Pluribus, or so I'm told.
no, we're not. business expenses dont work like that for companies, and not on that large a scale.
the rules fro business expenses are quite stringent and clear cut. if that sort of thing could qualify, all goods and services would be dramatically cheaper because EVERYTHING is a business expense, and they would be writing EVERYTHING off.
doesnt work like that; free lunch is an expense, but not a deductible one.
"Section 162(a) of the Internal Revenue Code is the deduction provision for business or trade expenses. In order to be a trade or business expense and qualify for a deduction, it must satisfy 5 elements in addition to qualifying as an expense. It must be
(1) ordinary and (2) necessary (Welch v. Helvering, 290 U.S. 111, defines this as necessary for the development of the business at least in that they were appropriate and helpful). Expenses paid to preserve one’s reputation do not appear to qualify (Welch v. Helvering). In addition, it must be (3) paid or incurred during the taxable year. (4) It must be paid in carrying on (meaning not prior to the start of a business or in creating it) (5) a trade or business activity. To qualify as a trade or business activity, it must be continuous and regular, and profit must be the primary motive"
So providing free lunch (or really most employee benefits) at work is disqualified from deductibility just by the first two:
1- lunch is ordinary, but providing free lunch to employees is not ordinary. they could just buy it themselves
2- not necessary. again, can buy it themselves. and while labor laws say you much provide a lunch break, it doesnt say you much provide the lunch
Essentiall the question is can the business function without it? If yes, its not deductible. If no, then it is. An independent truck driver who pays for his own gas (diesel): the diesel qualifies for deduction. The same truck driver who outfits his truck with an expanded cab with a mattress and wants to write off the installation: Most likely not (debateable; some agents I've talked to would let it go as it saves him money on long hauls, but most agree his business can function without it cause he can just sleep in a motel..which ironically would itself qualify for deduction).
Free lunch is a benefit to the employees that helps with morale and retention.
But while it may be an expense to the company, it is not a deductible one.
The guy who said the election was rigged won the presidency with the second-most votes.
I respectfully disagree. Half the water-cooler conversation I hear is about how to reduce taxes. Taxes influence behavior. I also don't think that government officials spending tax dollars are better are expanding growth than are you and I in making decisions (the market). I know people that live in Tx and hate it there but are not moving to NYC because of the increased tax burden. My wife and I are looking to move from NYC because of the tax burden.
Tax rates affect behavior.
If you're scared of your govt then you need to further restrict its powers
Vote 3rd Party in 2016 and beyond
As a Googler, I can tell you we ARE taxed for meals, to the tune of $4,650.00 in 2012. The company then pays a 'gross up' to make it a non-event for the employees. So all this complaining about 'free lunches' is entirely off-track, and this Professor of Law has demonstrated he doesn't know how to do basic research before talking.
I have the option of eating at my state university's cafeteria, but I get charged for the privilege at least as much as the students do.
Hail Eris, full of mischief...
E pluribus sanguinem
As a Googler, I can tell you we ARE taxed for meals, to the tune of $4,650.00 in 2012. The company then pays a 'gross up' to make it a non-event for the employees. So all this complaining about 'free lunches' is entirely off-track, and this Professor of Law has demonstrated he doesn't know how to do basic research before talking.
I can confirm this. My understanding was that the IRS negotiated an agreement which required taxes to be paid on meals at the smaller campuses, because on larger campuses the time it would take for Googlers to go off-campus to eat was accepted by the IRS as sufficient business value to justify it as a business expense. But that may be incorrect, or maybe the IRS changed its mind later.
In any case, I work in the Boulder office and I do pay income taxes on my meals, and Google then offsets it with a grossed-up payment so the tax doesn't impact my income.
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